15 Characteristics of Highly Successful InvestorsKehinde LAWAL
Are you a trader or investor? Have you ever wished you were an investment whiz kid like Warren Buffett, Peter Lynch or George Soros? Would you give everything just to become successful as these men? What special characteristics do highly successful investors possess that you don’t? If someone offered to explain to you in detail the basic characteristics possessed by every successful investor, will you listen and learn whole heartedly?
If your answer to the last question above is yes? Then please read on as I share with you 15 characteristics possessed by successful investors such as Warren Buffett.
“The philosophy of the rich and the poor is this: the rich invest their money and spend what is left.
The poor spend their money and invest what is left.” — Rich Dad
“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.” — John D. Rockefeller
15 Characteristics of Highly Successful Investors
1. Highly successful investors are proactive learners
The first characteristic of highly successful investors is that they are proactive learners. They spend more time studying than the average investors. They are also voracious readers. Successful investors know that their cup of knowledge must never be full so they always keep their minds open; ever ready to learn.
“To learn new things; you might need to unlearn old thought and tricks. Both processes can never be achieved without humility.” — Ajaero Tony Martins
These set of investors are also willing to pay for knowledge so long it’s something new. They read books, journals and magazines ranging from investing to personal development. They also attend seminars to improve themselves.
“The rich invest in time, the poor invest in money.” — Warren Buffett
2. They always invest with a planned exit strategy
“Go to the mouse you foolish investor and learn. A mouse never entrusts its life to only one hole.” — Ajaero Tony Martins
Successful investors know that there are always two sides to an investment. They know that the future is unpredictable so they prepare in advance for it. Average investors try to predict the future of their investments; they count their chickens before they are hatched. Successful investors do the opposite; they prepare for the best while still preparing for the worst.
“Always start at the end before you begin. Professional investors always have an exit strategy before they invest. Knowing your exit strategy is an important investment fundamental.” — Rich Dad
This is the ultimate reason why successful investors make money when the market goes up and even make more money when it comes down. Do you want to be a successful investor? Then plan your exit before you enter any investment.
“Many people rush into the game of investing thinking they are predators. When they get to the middle of the game, they then realize they are the prey and try to escape but it will be too late. Only the preys with a well defined exit strategy will escape, the rest will be slaughtered by the real predators.” — Ajaero Tony Martins
3. They are patient
Successful investors are very patient. When they make their calculations on an investment, they are prepared to wait to make sure their plan materialize. They plan to take advantage of a short term bulls market but as a back up plan, they still plan to hold on for as long as.
“I never attempt to make money on the stock market. I buy on assumption they could close the market the next day and not re-open it for five years.” — Warren Buffett
4. Highly successful investors have strong emotional control
Every true investor knows that the market is driven by sentiment. Market surges and declines are mainly caused by two emotional factors; fear and greed. Average investors invest based on these emotions but successful investors have a stronger control over these emotions. They don’t allow the talks of investment pundits or financial advisors affect their choice or method of investing.
“Every few seconds it changes, up an eighth, down an eighth. It’s like playing a slot machine. I lose $20 million, I gain $20 million.” — Ted Turner
Successful investors also have a neutral reaction to either winning or losing. They don’t abandon their investing strategy simply because of a few failures and they don’t become over confident when they are on the winning side. No matter the market conditions, they still respect the 50-50 chance of winning or losing.
“To be a successful business owner and investor, you have to be emotionally neutral to winning and losing. Winning and losing are just part of the game.” — Rich Dad
5. They have a well defined investing strategy
“A winning strategy must include losing.” — Rich Dad
Every successful investor has over time developed a well defined investing strategy that works and they stick to this strategy. While some successful investors implement the portfolio diversification strategy, others like Warren Buffett follow the portfolio focus strategy.
“Diversification is a protection against ignorance. It makes very little sense to those who know what they are doing.” — Warren Buffet
Though I strongly believe in portfolio focus strategy, I think every investor is entitled to his or her investing style. No matter the strategy you use, just make sure you know what you are doing.
“The wise man put all his eggs in one basket and watches the basket.” — Andrew Carnegie
To help you further understand some investing strategies you can adopt, below are some questions that can help you adopt an investing style:
- Do you diversify or focus your portfolio? While Warren Buffett strongly advocates portfolio focus strategy, I believe there are professional investors making a kill using the diversification strategy. Different strokes for different folks.
- Do you invest for short term or long term? Successful investors such as Warren Buffett invest for long term while George Soros mainly invest for short term and still became a success.
- Are you investing for capital gains or cash flow? Most fund managers invest for capital gains but successful investors like Warren Buffett invest mainly for cash flow, capital gains may come later.
- Are you a fundamental or technical investor? Most average investors try to be both but professional investors know that technical analysis and fundamental analysis may sometime contradict each other. So it’s advisable you stick to one. George Soros and Sir John Templeton are examples of technical investors while Warren Buffett is a fundamental investor.
“Buy when everyone else is selling and hold when everyone else is buying. This is not merely a catchy slogan. It is the very essence of successful investments.” — J. Paul Getty
6. They are focused
“The men who have succeeded are men who have chosen one line and stuck to it.” — Andrew Carnegie
Successful investors are focused on their investment vehicle. They take it one step at a time; one investment at a time. For instance; Tim Ferris said on his blog that he would rather stick to angel investing than attempt to stock trade because he understands angel investing better. Warren Buffett is focused on stocks, Tim Ferris on angel investing, Jim Rogers on commodities future and Donald Trump on real estate.
7. Successful investors use trend to their advantage
“Your greatest and most powerful business survival strategy is going to be the speed at which you handle the speed of change. That speed of change is trend.” — Ajaero Tony Martins
Another attribute of successful investors is that they know how to use trend to their advantage. Average investors panic over market fluctuations but professional investors welcome these fluctuations because it’s based on these fluctuations that they make their money.
Successful investors use trends such as market sentiments, political instability and company’s crisis to their advantage.
“Look at market fluctuations as your friend rather than your enemy. Profit from folly rather than participate in it.” — Warren Buffett
8. They are persistent
“When everything seems to be going against you, remember that the airplane takes off against the wind, not with it.” — Henry Ford
Sticking to your investing strategy whether you are winning or losing requires a great deal of persistence. Average investors lack persistence and that’s why they will forever remain average. They jump from one strategy to another and are always looking for the next hot tip.
“Most people give up just when they are about to achieve success. They quit on one yard line. They give up the at last minute of the game one foot from a winning touch down.” — Henry Ross Perot
9. They thrive on risk
“Risk comes from not knowing what you are doing.” — Warren Buffett
Investing is a risk but not knowing what you are doing is a greater risk. Every professional investor, whether on the winning or losing side still respect the 50-50 probability of success or failure. A major difference between a professional investor and an average investor is that a professional investor will always invest with a strong risk management system in place. Have you ever heard of the word “Hedge?”
“Seek advice on risk from the wealthy who still take risks, not friends who dare nothing more than a football bet.” — J. Paul Getty
10. Successful investors are disciplined
Successful investors are strict with themselves when it comes to investing. Aside their investing rules and principles, they are still guided by a strong self imposed standard. Professional investors know that it takes a great deal of discipline to stick to your investing strategies despite distractions from self proclaimed investment pundits.
“My two rules of investing: Rule one — never lose money. Rule two — never forget rule one.” — Warren Buffett
11. They know how to use leverage to their advantage
Before I proceed, I want to ask a question. What’s the major difference between a successful investor such as Warren Buffett and the average investor? My answer is this; a successful investor knows how to make money by investing with other people’s money while an average investor invests with personal funds. Investing with other people’s money is a form of leverage.
“The most important word in the world of money is cash flow. The second most important word is leverage.” — Rich Dad
Other people’s money is not the only form of leverage an investor can utilize. Your leverage can be your professional team, your investing experience or inside information.
“Financial leverage is the advantage the rich have over the poor and middle class.” — Rich Dad
“If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.” — J. Paul Getty
12. They learn quickly from their mistakes
“Even a mistake may turn out to be the one thing necessary to a worthwhile achievement.” — Henry Ford
When investors talk of experience, they are simply talking about the trials faced, mistakes made, lessons learned and triumphs achieved. You can never become successful investors without making some miscalculations or mistakes.
Successful investors make mistakes but they are not discouraged by these mistakes because they know mistakes are part of the process to becoming a better investor. Average investors perceive mistakes as bad but successful investors see mistakes as an opportunity to learn something new.
“Only those who are asleep make no mistakes.” — Ingvar Kamprad
13. They have a team of professional advisors
“It is better to hang out with people better than you. Pick out associates whose behavior is better than yours and you will drift in that direction.” — Warren Buffett
If you observe successful investors closely, you will notice they have a team of professional advisors. Average investors try to beat the market alone while professional investors invest as part of a team.
Successful investors also have a network of friends made of professional investors. They share advice and brainstorm on investing challenges with their investor friends. Do you want to be a successful investor? If yes, then it’s time to start choosing your friends carefully. Remember, birds of the same feathers flock together.
“I have been within the four walls of school and I have been on the street. I can confidently tell you that the street is tougher, challenging, daring, exciting and more rewarding. In school; you play alone. But on the street, you play with the big boys.” — Ajaero Tony Martins
14. They have a strong financial background
“Business and financial intelligence are not picked up within the four walls of school. You pick them up on the streets. In school, you are taught how to manage other people’s money. On the streets, you are taught how to make money.” — Ajaero Tony Martins
Just as stated in the quote above, you only become a better investor by being on the streets. Successful investors have a solid financial foundation; a foundation molded on the streets. On the streets, you learn from your own experience. Successful investors build up their financial base by attending seminars, reading books and journals, learning from a mentor and listening to tapes; after which they go out on their own to gain street experience.
Average investors try to hone their investing skills while still striving to avoid loss. Successful investors on the other hand know that experience come with losing money and learning from the loss.
15. Successful investors are passionate about the game of investing
“Men of means look at making money as a game which they love to play.” — J. Paul Getty
Why are you an investor? Your answer to this question will determine if you will be successful in the world of investing or not. A famous author once said this: “if you are going to play a game, choose a game you can play throughout your life time and investing is one of such game”.
If you take a look at average investors, they are always after how much they are going to make now but successful investors use delayed gratification and compounding to gain an edge.
“Wealth is only a benefit of the game of money. If you win, the money will be there.” — J. Paul Getty
In conclusion, these are the 15 characteristics possessed by every successful investor. If it’s your desire to join this league of investors, all you need to do is gradually develop these characters. As a final note, I want to state categorically that becoming a successful investor is within your reach. Just model the masters of the game and you will see yourself improving.
Ajaero Tony Martins is a serial entrepreneur, investor and a prolific blogger. He blogs about his entrepreneurial experience and provides hard core business development strategies. You can aswell follow him on twitter @StrategicTeam